May 4, 2020
'I am never going to buy an airline stock again': Baskin’s Barry Schwartz
‘I am never going to buy an airline stock again’: Barry Schwartz
One prominent Canadian portfolio manager says he’s following Warren Buffett’s lead by steering clear of airline stocks as the sector gets pummeled by COVID-19.
“If you look at Air Canada’s stock over the prior few years, it was one of the best-performing stocks on the TSX,” Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, told BNN Bloomberg’s Andrew Bell Monday. “And then here we are with the pandemic.”
“I am never going to buy an airline stock again.”
Schwartz’s comments come just days after Warren Buffett caught investors’ attention by saying he was dumping airline stocks amid the pandemic. The abandonment by the world’s most famous investors sent shares of major U.S. airlines lower Monday.
“The airlines [had] been very strong in terms of load factors, in terms of pricing, in terms of charging everybody for first-class seats where they used to give them away,” Schwartz said. “What they’ve done has been incredible. But we all know the world has changed dramatically. Yes, we’ll be flying again. But to what extent, no one knows.”
Air Canada was in the spotlight Monday after it reported first-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) sank almost 90 per cent year-over-year to $71 million, and Chief Executive Officer Calin Rovinescu warned it could be at least three years before the company returns to 2019 levels of revenue and capacity.
“What concerns me is how Air Canada is going to do over the next few years,” Schwartz said. “In the meantime, the balance sheet is absolutely destroyed for airlines across the world – and that just dramatically lowers the intrinsic value of these companies. So it’s very hard to rationalize how the airlines come out of here and what the earnings are going to be like.”
“I’m only looking to own the best, highest-quality companies that are going to survive here and thrive as we come out of the pandemic.”